Mexico’s Tequila Producers Eye Europe, Fearing U.S. Trade Changes

By Kara Newman

Men working in Herradura's agave fields. /Photo by Kara Newman

Tequila producers are bracing for restrictions from the U.S. government on Mexican goods, which might include a revamped North American Free Trade Agreement (NAFTA), increased tariffs or even a potential “border tax” on goods brought into the U.S. from Mexico.

“There’s definitely a sense of urgency,” to make provisions ahead of such moves, said Luis Velasco Fernández, president of the National Chamber for the Tequila Industry (CNIT), in a meeting last month with journalists in Guadalajara, Mexico “We don’t want to see any surprises”

For Tequila producers, restricted access to U.S. consumers holds particularly high stakes. The United States is the largest market for Mexico’s trademark agave spirit, representing 80 percent of the export market for Tequila, according to CNIT figures.

In addition, U.S. consumption of tequila has been on the upswing, DISCUS reports. Tequila exports to the U.S. rose 6.7 percent in 2016 to 161 million liters, or US$980.8 million in value. Mexico’s Tequila producers are nervous that trade restrictions or tariffs that could result in forcing retail prices higher, might crimp momentum for that nearly $1 billion northward flow.

“We are very dependent on the U.S.,” Fernandez admitted. “The U.S. is now twice as big as the Mexican market (for tequila).” In the meantime, he said, Tequila producers are ramping up efforts to market to other parts of the world, particularly European Union countries. “It is a priority,” he continued. “We don’t want to be dependent on the U.S., especially considering current conditions.”

Tequila consumption in Europe lags behind that of the U.S., noted Jesús Enrique Ramos Flores, secretary of tourism for the Mexican state of Jalisco. However, with Tequila representing a mere 1 percent share of worldwide spirits, “we have a lot of room to grow.”

While the officials said they remain “pretty optimistic” about relations between the U.S. and Mexico, their actions convey a more cautious stance. “We have been summoned by the Mexican authority to give our views. We are updating a treaty with Europe, which is not as old as NAFTA,” Flores said. “This is a commercial negotiation.”

“Whatever happens, if the treaty is updated, in the spirit of trading between historic partners, we will move forward,” Flores said.